Unicorn Club

Will Silicon Valley's Unicorn Herd Grow or Shrink in 2016?

Will Silicon Valley's Unicorn Herd Grow or Shrink in 2016?
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This story appears in the December 2015 issue of Entrepreneur. Subscribe »

You’re not hallucinating: Unicorns are indeed running wild across Silicon Valley. Once rare, unicorns -- startups valued at more than $1 billion -- are now shockingly commonplace: As of this writing, venture capital database CB Insights counts 141 companies with a cumulative valuation of $506 billion. They include Uber (valued at $51 billion), Airbnb ($25.5 billion) and Snapchat ($16 billion), as well as Chinese electronics company Xiaomi ($46 billion) and Indian e-commerce marketplace Flipkart ($15 billion).

These unicorns are disrupting the disruptors, transforming the ways startups do business. While private companies once fiercely guarded their financial information, many fundraising announcements now spotlight valuation data. Even The New York Times, historically a voice of reason, compiled a list of 50 upstart companies projected to become unicorns. The unicorns of today, meanwhile, are grazing on established tech giants in pursuit of talent: Uber and Airbnb have poached Google employees with the promise of fast-paced workplace cultures and potentially massive payouts.

But the herd may be thinning. Some influencers warn that the end is near; most notably Bill Gurley, general partner at VC firm Benchmark, who in August tweeted, “We may be nearing the end of a cycle where growth is valued more than profitability” and warned, “I do think you’ll see some dead unicorns this year.”

Salesforce CEO Marc Benioff also forecasts doom. “It’s dangerous for these entrepreneurs that they’re more focused on their market cap than on their customers,” he said in August. “When I see them get more focused on being a unicorn than being a company with a high level of customer satisfaction -- a high level of employee satisfaction and a company that’s giving back to the community -- then I know it’s a problem.”

Brace yourself: Winter is coming.